The causal relationship between insider ownership and market valuation is tested by
simultaneous estimation of the causes and effect of insider ownership among the largest
continental European companies. Controlling for nation and industry effects insider
ownership (measured by the fraction of "closely held" shares) is found to have a positive
effect on market valuation (market-to-book values). And market valuation is found to have a
positive feedback effect on the level of insider ownership. The findings provide empirical
support for a theoretical model proposed by La Porta et al (1999). But the results are also
found to be sensitive to owner identity: while a higher level of financial and corporate insider
ownership is found to increase market valuation, family ownership has no significant effect,
and a higher level of government ownership is found to reduce market valuation.

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China‟s increasing integration with the world economy is met with much anticipation and much anxiety in the Southeast Asian region. In Indonesia, there is intense interest in Chinese foreign direct investment (FDI), not only among academics but also among policy makers, industrialists and the general public. So much more surprising is the fact that no systematic study of Chinese FDI in Indonesia has been undertaken to date. The current paper contributes to filling this gap and analyses the current composition as well as the historical evolution of Chinese FDI in Indonesia. Relying on a survey conducted in 2008 among Chinese invested enterprises supplemented with available official statistics and secondary data, the study finds that Chinese FDI in Indonesia is performed by mixed entities: some are owned by central government, some by regional government and some are private firms. In the case of joint ventures, their local partners are mostly local Chinese, except in the infrastructure, mining and energy sector where their local partners are Indonesian state-owned enterprises. Where the local developmental effects are concerned, a picture emerges where Chinese investments, at this early period of their internationalization, are likely to give rise to a more modest extent of positive spillovers than investor from more economically advanced countries. This stems from the sectors, investment motives and operational strategies of Chinese investors, the heritage of ethnic tension and segmentation of the economic system along ethnic lines in Indonesia, and the likelihood that Chinese MNCs as latecomers are more vertically integrated than their developed-country counterparts. Finally, considering the evolution of Chinese investments in Indonesia over time, investments have evolved from being individual and isolated projects to acquiring more systemic properties. Chinese companies have acquired a broader sectoral presence in Indonesia and Chinese invested companies in e.g. extractive or manufacturing activities can increasingly rely on complementary Chinese investments in logistics, travel, finance etc.

In this paper we use rich panel data for a representative sample of Estonian enterprises to analyse
diverse issues related to the determinants of ownership structures and ownership changes after
privatisation. A key focus is to determine whether ownership changes are related to economic
efficiency. While employee owned firms are found to be much more prone than other firms to
switch ownership categories, often "employee owned" firms remain "insider-owned" as ownership
passes from current employees to managers and former employees. Logit analyses of the
determinants of ownership structures and ownership changes provides mixed support for several
hypotheses. As predicted: (i) wealth and resource constraints play a crucial role in the
determination of ownership, with foreigners buying firms with the highest equity levels and
insiders buying firms with the lowest equity valuations; (ii) risk aversion explains subsequent
ownership changes, especially away from employee ownership; (iii) allocation of ownership
depends on the pre-privatisation origin and location of the firm, and these factors also influence
subsequent ownership changes. Finally we compare our findings with those achieved by using
more conventional approaches to analyze efficiency that use very similar data. Reassuringly the
evidence presented in this paper is consistent with the view that efficiency considerations drive
ownership changes (while earlier analysis for Estonia and for many other transition economies has
identified the impact of ownership on economic performance.) However, the findings in this paper
also establish that there are important influences besides economic efficiency that affect enterprise
ownership and ownership changes.

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Much has been written about how international firms create and sustain firm-specific advantages that offset their liability of foreignness. Less attention has been devoted the question of how international firms can reduce their liability of foreignness. Looking for different paths of learning our study explores the dynamics of firms’ liability of foreignness. A sample of 494 international firms from Sweden, Denmark and New Zealand is clustered along three structural dimensions of liability of foreignness: (1) perceived lack of knowledge about the foreign market, (2) the longevity of operations in the foreign market, and (3) international experience of the entrant firm. The four clusters that precipitate represent different learning path positions. One group of firms can be identified as pre-entry learners, another group as post-entry learners. A minor group of firms is characterized by perceiving a persistent lack of knowledge about the foreign market they are operating in. One might speculate if these firms engage in any learning about the foreign business environment. Furthermore, the data suggest that firms with extensive international experience are more capable in familiarizing with the foreign business environment than are firms with little international experience.

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We begin by identifying a typical governance life-cycle, defined as changes in ownership structure, and including both the identity of the major owner and ownership concentration. The cycle is marked by key events and phases including start-up, initial growth, mature growth, and possibly a crisis and restructuring stage or exit stage. The governance cycle for transitional countries reflects some specific characteristics –e.g. often privatization produces specific initial ownership structures, with an unusually high proportion of insider, especially, employee ownership. Subsequently pres-sures for restructuring produce strong impulses for ownership changes. There is limited possibility for external finance because of the embryonic development of the banking system and the capital markets during early transition. The governance cycle is also influenced by specific features of the institutional, cultural and economic environment in a country. The varying importance of these fac-tors is expected to produce differences in key features of ownership cycles such as the speed at which particular ownership changes occur. To provide simple hypothesis tests, we use new and rich enterprise panel data sets for the three Bal-tic countries. The data enable various measures of ownership to be constructed (including the iden-tity of major owners and ownership concentration). The empirical analysis covers the ownership cycle with emphasis on initial ownership and subsequent changes. Our key method is to assemble a series of transition matrices showing both starting and final ownership configurations for sample enterprises and to simultaneously provide information on changes in concentration for the largest single owner. For Estonia this is supplemented with an analysis of the frequencies of different own-ership-cycles including intermediary stages of ownership. In spite of important differences in insti-tutional development, especially concerning the privatization process, we find that governance cy-cles are broadly similar in all countries. Employee ownership is rapidly fading and mainly being succeeded by managerial ownership. There are changes back and forth between manager and do-mestic external ownership, while foreign ownership is quite stable. Ownership concentration is mostly increasing after privatization, which included diversification both to employees and external owners. Since ownership diversification did not sit well with the slow development of the institu-tional framework, as expected we see a subsequent concentration of ownership on both managers, external domestic and foreign owners. However, variation in institutions, there are also important differences across countries. The adjustment of ownership structures is faster in Estonia and this can be explained by the relatively fast pace of institutional change and evolution of important gov-ernance institutions, including tough bankruptcy legislation and advances in the financial system.
JEL-codes: G3, J5, P2, P3 Keywords: corporate governance, life-cycle, privatization, ownership change, transition econo-mies, Estonia, Latvia, Lithuania .

New and rich panel data for a large and representative sample of firms are used to estimate the sensitivity of access to capital to differing ownership structures. The investment behaviour of firms is examined in a dynamic setting in the presence of adjustment costs, liquidity constraints and imperfect competition. The empirical work is based on the derivation of Euler equations in the presence of symmetric and quadratic adjustment costs and both debt and equity constraints. Whereas the norm is to use ad hoc approaches to model these constraints, our alternative and more consistent leads to the inclusion of financial variables in investment equation in first differences rather than in levels. Our GMM estimates confirm the importance of financial factors in determining investment rates and suggest that firms owned by insiders, especially non-managerial employees, are more prone to be liquidity constrained than are others. Among the other groups, somewhat surprisingly, only domestic outsider owned firms display sensitivity to both measures of the availability of finance, with manager owned firms being sensitive to the availability of external finance, while state owned firms being sensitive to the availability of internal finance. Corporate Investment, Corporate Governance, Adjustment Costs, Liquidity Constraints, GMM Estimates, Transition Economies.

New and rich panel data for a large and representative sample of firms are used to estimate the sensitivity of access to capital to differing ownership structures. The investment behaviour of firms is examined in a dynamic setting in the presence of adjustment costs, liquidity constraints and imperfect competition. The empirical work is based on the derivation of Euler equations in the presence of symmetric and quadratic adjustment costs and both debt and equity constraints. Whereas the norm is to use ad hoc approaches to model these constraints, our alternative and more consistent leads to the inclusion of financial variables in investment equation in first differences rather than in levels. Our GMM estimates confirm the importance of financial factors in determining investment rates and suggest that firms owned by insiders, especially non-managerial employees, are more prone to be liquidity constrained than are others. Among the other groups, somewhat surprisingly, only domestic outsider owned firms display sensitivity to both measures of the availability of finance, with manager owned firms being sensitive to the availability of external finance, while state owned firms being sensitive to the availability of internal finance. Corporate Investment, Corporate Governance, Adjustment Costs, Liquidity Constraints, GMM Estimates, Transition Economies.

Abstract
In a recent global competitiveness report by the IMF, the four Nordic countries all ranked in top ten, attesting to the region’s growing attractiveness as a host location for MNCs. This paper investigates the driving forces determining foreign direct investment flows into Scandinavia. We use a panel data set covering FDI inflows to Denmark, Sweden, Norway and Finland for the period 1979-2000. Results suggest that, in addition to traditional determinants of FDI, technological advantages of the region are of particular importance for foreign investors. Thus, evidence is provided for the changing pattern of international production indicating strategic needs for MNCs to acquire assets and technology that are specific to particular locations.